The World’s Largest Hedge Fund Doesn’t Believe In Bitcoin Being The Currency Of The Future

It’s a predicament that bitcoin continues to surge

Image credit: Cointelegraph

Ray Dalio, the co-CIO and founder of the world’s largest hedge fund Bridgewater Associates recently tweeted his thoughts on bitcoin and as to why it may not be the “future of currency”.

When you swipe your credit/debit card, your information is immediately sent for processing to a merchant bank, which in return sends this signal to the servers of Visa/Mastercard to check for any kind of fraudulent transaction and if the signal reciprocates in a positive manner, the customer’s query is then sent to the ‘customer’s bank’ which sets aside the funds from the customer’s account and sends this information back to Visa/Mastercard and then eventually to the merchant bank again, before the customer gets the chance to finally walk out of the store with the required items.

This entire process makes use of several intermediaries that cryptocurrencies don’t.

Crypto transactions are dealt with through a digital ledger called a blockchain and are monitored through peer-to-peer transactions. There is technically no central authority that processes these transactions when it comes to cryptocurrencies.

Blockchain, bundles transactions into blocks which are then chained together and broadcasted to the nodes in the central network. This central network is better known as Distributed Ledger Technology (DLT).

The conflict of interest between banks, big businesses, and the government should now appear to be crystal clear. If any particular government, wants to impose a “centralized digital banknote” system combining the permissioned network feature of DLT’s and the payment mechanism of blockchain, it would mean that there would be no need for banks to act as intermediaries! If they fail to obtain deposits, they simply cannot issue any form of loans.

Thus, in essence, cryptocurrencies can be deemed to be safe, but unless it’s regulated most governments and corporations would not accept them as a “store of value”.

Image: Taken from Ray Dalio’s Twitter account

“I might be missing something about Bitcoin so I’d love to be corrected. My problems with Bitcoin being an effective currency are simple. They are that

1) Bitcoin is not very good as a medium of exchange because you can buy much with it (I presume that’s because it’s too volatile for most merchants to use, but correct me if I’m wrong)

2) it’s not very good as a store-hold of wealth because it’s volatility is great and has little correlation with the prices of what I need to buy so owning it doesn’t protect my buying power, and

3) if it becomes successful enough to compete and be threatening enough to currencies that governments control, the governments will outlaw it and make it too dangerous to use

Also, unlike gold which is the third highest reserve assets that central banks own, I can’t imagine central banks, big Institutional investors, businesses or multinational companies using it. If I’m wrong about these things I would love to be corrected. Thank you”

Over the past five years, the price of bitcoin went up 20 times and subsequently went down 83 percent and it rallied over $40,000 recently!

It can be used for investing or speculative purposes, but it cannot be used as an “everyday currency”. Bitcoin or Ethereum doesn’t protect your buying power and if it enters a hypersensitive area, governments will ban the cryptocurrencies simply because it threatens their own currency, which they can control or print at will.

Decentralized currencies like bitcoin or Ethereum won’t necessarily be used as a “medium of exchange”.



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